According to more exuberant predictions, gold could soar to USD 5,000 per ounce in 2020. While claims of this magnitude are unlikely to come true any time soon, they do reflect a strong body of opinion that the yellow metal will continue to build on the gains it made in 2019.
Gold ended last year on a high, settling above the psychologically important USD 1,500 mark, a 12-month rise of around 18%. That’s its best year since 2010.
In Australian dollar terms, the price remains close to its 2019 high, comfortably above AUD 2,000 an ounce.
Low interest rates certainly helped the case for gold. When interest offered on bank deposits fail to cover the rate of inflation, investors’ cash loses its purchasing power. The precious metal is seen by many as a great way to preserve wealth – and in this scenario it prompted Perth pensioner Ollie Price to switch 20% of his savings into gold.
Equities provided cautious investors with another quandary. Although markets performed well in 2019, experts have warned that stocks could now be at full or near full price, particularly in the US where the market has soared to an all-time high. Worryingly, some commentators have suggested cracks are beginning to show in the world economy and that a recession is possible sooner rather than later.
Because gold tends to hold its value or even rise in times of market turmoil, some investors use it as a type of insurance. The strategy, known as hedging, is defined as an investment designed to reduce the risk of adverse price movements in a separate asset.
So, with uncertainty remaining over the eventual outcome of drawn-out US-China trade negotiations and even Brexit to a degree, it seems key factors that drove gold’s run up during 2019 remain in play.
Meanwhile, the prospect of higher interest rates appears as remote as ever. Indeed, according to a recent poll of Australian economists, the majority believe we’re in for further cuts during 2020.
In such circumstances, Australian investors seeking to preserve wealth and diversify their portfolios may want to investigate gold further. With regular analysis from our Senior Investment Manager Jordan Eliseo and updates demonstrating how easy it is to buy and sell gold, our blog is a great place to start your research for a golden 2020.
